Comedian-Con is susceptible to dropping its nonprofit standing, the state says, solely days after the large tourism draw signed up with IMG in a licensing deal amid a reported $8 million loss in COVID-stricken 2020.
In a letter dated Thursday, California Lawyer Common Rob Bonta warned organizers of the San Diego Comic Convention that the 501(c)(3) nonprofit dangers dropping its tax-exempt standing in the event that they don’t meet a deadline or get an IRS extension.
“A corporation that’s delinquent, suspended or revoked isn’t in good standing and is prohibited from partaking in conduct for which registration is required, together with soliciting or disbursing charitable funds,” Bonta wrote.
It wasn’t instantly clear what lack of nonprofit standing would imply to town or the super-popular occasion, whose annual attendance exceeded 130,000 a 12 months for the last decade earlier than 2020 and generated tons of of million of {dollars} for close by outlets and lodges.
Comedian-Con, which was purported to have filed IRS Form 990 by Dec. 31, didn’t instantly reply to requests for remark.
Neither did San Diego metropolis officers, tourism authorities or the San Diego Conference Middle — which hosts the subsequent Comedian-Con in late July.
However final Nov. 18, Comedian-Con filed its annual registration renewal payment report, which mentioned it had $3.97 million gross income in 2020, when the pandemic compelled suspension of Comedian-Con. Its gross bills that 12 months have been $11.98 million. (Its complete property have been $42.4 million.)
The letter to Comedian-Con mentioned it has till Might 15 to file a state type. Bonta mentioned that if IRS kinds aren’t despatched to the state Registry of Charitable Trusts inside 60 days of April 7 — or June 6 — two issues would occur:
- His workplace would notify the California Franchise Tax Board to disallow Comedian-Con’s tax exemption. (“The Franchise Tax Board could revoke the group’s tax exempt standing at which level the group can be handled as a taxable company … and could also be topic to the minimal tax penalty.”)
- Late charges can be imposed for every month or partial month for which studies have been delinquent. “Administrators, trustees, officers and return preparers chargeable for failure to well timed file these studies are additionally personally responsible for fee of all late charges.”
Bonta’s letter arrived three days after agent-to-corporate-and-Hollywood-stars IMG introduced that it could work with Comedian-Con to “determine companions who can develop merchandise, retail locations and experiences for the tens of millions of followers not capable of partake within the annual Comedian-Con conference expertise.”
In a statement, IMG’s president of licensing mentioned: “Over 50 years in the past, the Comedian-Con founders merely needed to attract consideration and recognition to the comics and different artwork kinds they beloved. In doing so, they found a shared curiosity on this and associated Sci-Fi, fantasy, and style content material wider than they might have probably imagined.”
The official, Bruno Maglione, continued: “At the moment, that comedian tradition is mainstream leisure tradition thanks largely to Comedian-Con’s championing of this artwork type and its sensible creators, and Comedian-Con is the main curator model and information on this house, permitting it to safe shopper consideration and ship shopper worth in additional methods.”
At the least one Comedian-Con observer took the announcement to imply that the group would franchise itself — spin off different Comedian-Cons.
Writing on bleedingcool.com, Wealthy Johnston mentioned: “San Diego Comedian-Con would be the world’s finest identified comedian e book conference. However there is just one of it.”
He mentioned that whereas ReedPOP, a for-profit venture, has massive reveals across the globe, San Diego Comedian-Con “just about simply stays the place it’s, with solely WonderCon in Anaheim” as a spin-off from the organizers’ Comedian-Con Worldwide and its new museum in Balboa Park.
“San Diego Comedian-Con’s model is massive, however its precise bodily footprint is small,” Johnston mentioned.
Lloyd Hitoshi Mayer is a legislation professor at Notre Dame Regulation Faculty who has written extensively on nonprofits.
He says it’s exhausting to inform whether or not Comedian-Con is making an attempt to franchise itself.
“Comedian-Con might be exploring solely licensing its title, different logos and different mental property for others to make use of for a royalty payment, or it might be exploring establishing associates that is perhaps thought-about franchises legally (which might implicate state franchise legal guidelines,” Mayer instructed Occasions of San Diego.
An IMG licensing deal is OK below IRS nonprofit legal guidelines, Mayer says.
“A charity is allowed to rent a for-profit dealer for an affordable payment to discover monetizing its title and different mental property, the identical means it’s allowed usually to rent outdoors events to work on its behalf so long as any charges paid are cheap,” he mentioned by way of e mail.
A charity is allowed to license its mental property to others so long as it receives cheap royalties in return — and people royalties are usually exempt from federal revenue tax, he mentioned.
“The problems that come up with such offers have a tendency to not be authorized however public relations — for instance,… a licensing deal by the American Medical Affiliation that blew up on them,” he mentioned.
In 1997, the American Medical Affiliation signed an endorsement deal with Sunbeam Corp., the maker of small dwelling home equipment. The AMA would obtain main royalties from Sunbeam in alternate for using its seal on Sunbeam’s dwelling health-care merchandise.
However the deal to position the AMA’s emblem (a serpent coiled on a employees) on health-care merchandise in alternate for a proportion of gross sales sparked opposition as a battle of curiosity.
“Supporters argued, nevertheless, that the deal was a great way for the AMA to ease the affiliation’s monetary troubles,” mentioned a Harvard Enterprise Faculty report. “Moreover, the deal can be useful to sufferers as a result of it inspired folks to observe their very own well being.”
The Sunbeam deal fell aside inside days, nevertheless, and AMA admitted “errors in judgment.”
Notre Dame’s Mayer famous that almost all charities are cautious of licensing their names and different mental property to others due to the potential public relations points it could actually create.
“Usually a charity’s most beneficial property is its title and associated popularity,” he mentioned. “That mentioned, many charities do enter into licensing offers however are cautious to restrict these offers to conditions the place their reputations won’t be harmed.”
Many non-public schools and universities license using their names and logos to bank card firms that then market affinity bank cards to alums, he mentioned. However the colleges get to approve mailings and different promoting regarding the affinity bank cards.
“What Comedian-Con is exploring right here seems to be extra in depth than what most charities take into account, though Comedian-Con has not but dedicated to something,” Mayer mentioned.
Mayer suspects that the IMG deal is a results of Comedian-Con’s monetary losses through the pandemic.
“Licensing its title and different mental property is a respectable means for a Comedian-Con, as a charity, to acquire extra income,” he mentioned. “The most important problem dealing with Comedian-Con when doing so is to make sure that it doesn’t damage its model by changing into related to merchandise, retail locations or experiences which might be of poor high quality, inconsistent with its mission or in any other case create damaging perceptions of Comedian-Con.”
Many nonprofits have licensing offers, together with the American Coronary heart Affiliation (with its Coronary heart-Examine mark), the American Pink Cross, Boy Scouts of America, Woman Scouts of the USA, the Nationwide FFA Group, and the Nationwide Wildlife Federation.
Within the IMG information launch, Comedian-Con spokesman David Glanzer mentioned SDCC started talks with IMG round six months in the past.
“In the midst of these discussions, it hit dwelling to us that we might use our experience to serve the ever-growing fan neighborhood in additional methods, locations and instances than ever earlier than.” He mentioned. “In 2021, we launched into the brand new Comedian-Con Museum and now, with IMG’s experience working with specialist companions to ship genuine model experiences, we will pursue an thrilling new section for the Comedian-Con model.”
Ricardo Yoselevitz, senior VP of licensing, mentioned IMG would work with Comedian-Con to “determine merchandise and locations that create new methods and avenues to interact this passionate neighborhood, whereas additional reinforcing Comedian-Con’s place because the main curator of this type of fashionable artwork and tradition.”
He mentioned: “By way of its annual conventions, it’s clear that Comedian-Con has turn out to be a robust shopper model with out even making an attempt.”
